Many registered investment advisor (“RIA”) firms are experiencing increased growth in terms of assets under management (“AUM”) and employees. As RIA firms seek to hire (or acquire) new talent, they must prepare their compliance programs to properly onboard any new members of their teams. This is a vital step in creating and maintaining a culture of compliance.
We’re providing RIAs with a series of content this spring on how to optimize their compliance programs. Our last blog post covered compliance considerations while hiring new employees. In this post, we discuss key compliance components to keep in mind while onboarding and what to include in your policies and procedures regarding onboarding new employees at your firm.
Introduce Your Processes
There are several moving parts to onboarding your firm’s new employee. To ensure you don’t miss any key steps along the way, it’s important to have a system in place.
We recommend you develop a checklist that follows the 5 C’s of onboarding:
- Compliance
Don’t assume they know everything about current regulations from the SEC or state securities regulators. Introduce your new hire to all rules and regulations within your firm, and ensure all necessary paperwork is filled out correctly. This includes tax forms, employment eligibility, and company policies. - Clarification
Give your new employee a written, detailed list that outlines their responsibilities and duties within your firm. - Culture
Provide your new hire with all the resources and tools they need to succeed, while also giving them a set of organizational norms to follow. - Connection
Introduce your new employee to colleagues who can equip them with vital information, help them build interpersonal relationships, and provide a point of reference for potential questions they may have. - Cybersecurity
Ensure your new employee has proper cybersecurity training planned for their specific role within the organization. Update the training materials to be current with cybersecurity regulations and emerging cybersecurity threats.
Compliance Considerations and Expectations
Of these five steps, we want to dive into the first one: compliance. All members of your firm must have a clear understanding of the importance of compliance, and how they are individually responsible to mitigate regulatory and financial risk.
Below are topics to cover in your onboarding process:
- Fully disclose all matters within the Form U4, include a background check or review of the new employees CRD/IAPD.
- Report all outside business activities that may be considered a conflict of interest, and how to keep this information up to date.
- Proper guidance regarding receiving gifts from, or giving gifts to clients or potential clients.
- The reviewal process for materials that will be published or sent to clients.
- The process, production and review of marketing to clients or potential clients.
- An overview of the compliance task system your firm has in place to promote compliance and supervision
of employees, including logging continuing education credits, attestations of the policy and procedures manual, code of ethics and privacy policy and disclosure of their personal accounts, holdings and
quarterly transactions. - The approval process for client correspondence.
- The proper methods and channels to communicate with clients or potential clients. Many firms do not allow text messaging. Which communication channels can they use to interact with clients? Which channels are
off-limits? - Your firm’s social media policy and personal social media policy.
If the new team member plans to write or publish blogs or social media posts on behalf of the firm, ensure they fully understand the firm’s policies and procedures for marketing. See our blog post on the SEC Marketing Rule to learn more about the current requirements.
Create a Compliance Review Timeline
You may find it helpful to break down your onboarding checklist into weekly or even daily segments. We highly recommend leveraging technology, like a compliance calendar to create an “onboarding checklist” to ensure all crucial steps are taken on time and properly documented.
Corporate Channels
You probably have a list of red-flag words and phrases to avoid in all client-facing communications, like emails and marketing materials, —and your new hire needs to become familiar with them (e.g., guarantee, promise, ensure).
Also, employees should know not to share market performance numbers on social media without providing context, because it could seem like you’re promising performance.
Compliance isn’t just the CCO’s job
We can’t stress this enough. Everyone has to do their part to create a culture of compliance. By incorporating compliance into your onboarding process, you can help your team understand the important role they play to meet regulatory requirements.